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The Justice Department’s U.S. Trustee Program (USTP) recently prevented the payment of bonuses to an executive of three small businesses that had stopped operating and already had sold their assets in bankruptcy, according to a DOJ press release. Aviation Safety Resources and its two debtor affiliates, which filed for bankruptcy under subchapter V of chapter 11, argued that $30,000 in bonuses were designed to incentivize the companies’ president to avoid leaving for other employment and to facilitate a sale of the debtors’ assets. The U.S. Trustee’s Orlando office objected to the bonuses as a “key employee retention plan,” commonly known as a KERP, which is impermissible under the Bankruptcy Code for insiders unless the proponent can satisfy stringent standards. Among other things, the USTP argued that the bonuses were not incentivizing because they were not tied to any performance-based metrics and that the debtors had already closed on the sale of nearly all their assets three days before filing a motion to approve the bonuses. On February 2, after a half-day trial, the Bankruptcy Court for the Middle District of Florida sustained the U.S. Trustee’s objection and denied the debtors’ KERP motion.

Bayer AG is weighing whether to use a controversial legal maneuver known as the Texas Two-Step to try to resolve tens of thousands of U.S. lawsuits claiming its Roundup weedkiller causes cancer, Bloomberg News reported. Faced with a recent string of costly jury verdicts over the herbicide, Bayer executives are consulting with law firms and advisers about how to prompt a bankruptcy judge to halt further trials scheduled for this year. The object is to wrangle a settlement of more than 50,000 cases. Bayer is looking for breathing room after it was hammered over the last four months with Roundup jury verdicts totaling about $4 billion. While the company has won more recent trials than it has lost, its latest courtroom defeat was its biggest yet, with a Pennsylvania jury awarding $2.25 billion to a man who blamed his cancer on long-term exposure to Roundup. Bayer maintains the product is safe. “Given the recent rulings on Texas Two-Step bankruptcies, I’m pretty sure Bayer knows this is a long-shot bid for a settlement,” said Prof. Bruce Markell, a former federal bankruptcy judge who now teaches law at Northwestern University. “But they may feel like they don’t have any other choice.”

The Securities and Exchange Commission can proceed with its suit accusing Gemini Trust Co. and bankrupt cryptocurrency lender Genesis Global Capital of illegally offering unregistered securities through their interest-paying Gemini Earn product, Bloomberg News reported. U.S. District Judge Edgardo Ramos in New York yesterday denied a request to throw out civil claims the SEC filed in January 2023. The agency is seeking an order barring Gemini and Genesis from selling unregistered securities, requiring them to give up money they illegally earned from the program plus civil penalties. Earn allowed customers to lend their cryptocurrency to collect interest. The defendants argue that the transactions are loan agreements that don’t constitute securities under U.S. law. Ramos said that according to the SEC’s complaint, Earn met the U.S. Supreme Court’s test for a security because customers were investing in a common enterprise and had a reasonable expectation of profit. Therefore, the SEC “plausibly alleges that defendants offered and sold unregistered securities through the Gemini Earn program,” the judge said. That same test has been used by other judges to determine whether digital assets themselves are securities, though courts have reached different conclusions. Genesis filed for bankruptcy soon after the SEC filed suit. Gemini Trust Co., the crypto exchange founded by twins Cameron and Tyler Winklevoss, last month agreed to return at least $1.1 billion to customers through the Genesis bankruptcy as part of a settlement with the state of New York. Wednesday’s ruling allows both sides to go forward with pretrial evidence-gathering. The companies may try again to have the case thrown out once they have exchanged records and taken pretrial deposition testimony from witnesses.

Enviva, the largest U.S. wood-pellet exporter, filed for bankruptcy Tuesday after a bad bet on future prices of the commodity triggered nine-figure losses, WSJ Pro Bankruptcy reported. The Bethesda, Md.-based company filed a chapter 11 petition in the U.S. Bankruptcy Court in Eastern Virginia. Enviva markets its wood pellets as a low-carbon alternative to fossil fuels. It began building its manufacturing plants and export network in 2010 with financing from energy-focused private-equity firm Riverstone. The company said last year that it had also been buying additional pellets and aiming to resell them for a profit, but that strategy backfired when pellet prices fell. Enviva was on the hook to pay $296.3 million for 800,000 metric tons of wood pellets that would only be worth $156.9 million on the open market, according to a November securities filing. The company also said at the time that it expected another $140 million in losses over the next two years based on the prices at the time for future deliveries of pellets. It had roughly $1.8 billion of debt as of last September.
In January, the company missed a $24 million interest payment owed to its bondholders. The Wall Street Journal reported last month that Enviva was preparing for bankruptcy and that certain bondholders had offered to provide financing for the chapter 11 proceedings.

Electric-vehicle startup Fisker has hired restructuring advisers to assist with a possible bankruptcy filing, the Wall Street Journal reported. Fisker, which recently warned that it risked running out of cash this year, hired financial adviser FTI Consulting and law firm Davis Polk to work on a potential filing. The car company reported last month that it had $273 million in sales last year and more than $1 billion in debt. Fisker last month issued a so-called going-concern warning that there was “substantial doubt” about its ability to stay in business. The company said it was negotiating to raise additional cash from investors and looking for a new manufacturing partner in the U.S. Shares of Fisker fell more than 46% in after-hours trading Wednesday after The Wall Street Journal reported the company’s hiring of the restructuring firms. The Manhattan Beach, Calif.-based company in late February delayed the release of its full financial results for last year, because it lacked a sufficient number of experienced accounting professionals, according to a regulatory filing.

A hedge fund founder at the center of a $1.2 billion legal battle between Indian education-technology company Byju’s and its lenders is staying outside the U.S. despite a court order to return, saying he fears for his safety, WSJ Pro Bankruptcy reported. William Cameron Morton said in an interview that he left the U.S. rather than comply with a court order to divulge the whereabouts of nearly $540 million that Byju’s invested in his Florida-based hedge fund firm, Camshaft Capital. Morton faces the threat of jail time because he hasn’t turned over that information to investors that lent $1.2 billion to Byju’s, once India’s most valuable startup before its financial problems clouded the country’s venture-capital scene. Judge John Dorsey of the U.S. Bankruptcy Court in Wilmington, Del., recently threatened Morton with “all possible sanctions,” including confinement, if he continued ignoring orders. Credit funds including Ares Management and Redwood Capital allege that Morton helped Byju’s move more than a half-billion dollars out of their reach through his hedge fund, which they have called a sham operation. Last month, an agent acting on the lenders’ behalf filed a chapter 11 petition for Byju’s Alpha, a shell entity named as the loan borrower, as part of their efforts to track down the money it invested in Camshaft. Byju’s has said it wasn’t required under its loan agreement to keep its assets in cash and did nothing wrong by investing $540 million with Camshaft.